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ATO notes incorrect claims for the R&D tax incentive a focus in the construction, professional, scientific and technical services sector

In an ATO release on 1 October 2025 titled ‘Tax risks: property, construction and professional services‘ the ATO have noted that they will be focusing on R&D Tax Compliance.

The document notes:

 ‘We continue to see recurring issues in specific industries. We’re watching closely, conducting audits, and applying penalties and interest where needed.

Our focus is on small businesses in:

• the property and construction industry – including builders, contractors and tradies.
• the professional, scientific and technical services sector – such as engineering, design, IT, management and consulting professionals.

In these industries, we continue to see recurring issues due to mistakes, misunderstandings or deliberate behaviour. Common errors include:

• incorrect claims for the R&D tax incentive (R&DTI), especially for activities that don’t meet the eligibility criteria….’

As noted in an update in September 2025, Swanson Reed has observed a modest increase in regulatory compliance activity for R&D claims over recent months.

Swanson Reed hopes that as compliance activities increase, that they remain balanced and reasonable (as we have observed them to be over the past 4 years, since around 2020).

Swanson Reed recognises the important role that the programme regulators (DISER and ATO) play in maintaining the integrity of the R&D Tax Incentive. Effective compliance processes are key in maintaining the sustainability of the programme.

Companies claiming activities under the R&D Tax Incentive must ensure they have suitable documentation in place before claims are made, as unsubstantiated claims can be subject to reversal of R&D Tax Offset entitlements and the imposition of penalties.

The current regulator guidance is here:

• ATO guidance on expenditure documentation;
• DISER guidance eligible activities.

Please get in touch with our office if you require assistance, would like to speak to someone about a potential claim, or check out our website for more information.